Author: Derek Higa

Derek Higa is a senior equity analyst and a lead for the APAC region and the Consumer Cyclical sector. He serves on the Global Focus List Committee, which approves all equity recommendations for developed, emerging, and frontier markets, and compiles Asia Watch, a weekly recap of regional investing news. Since joining William O’Neil + Company in 2005, he has lent his market expertise to alpha capture, product development, and historical studies on outperforming stocks. Derek graduated summa cum laude from California State University Los Angeles with a B.S. in Finance and Information Systems. He holds a Series 65 securities license.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) faced resistance along its declining 21-DMA and pulled back to its 52-week low. We recommend a patient and cautious approach to adding risk. Look for indices to hold above September lows in the near term.
  • India is in a Confirmed Uptrend. Seven markets, including Japan, Singapore and China, are in an Uptrend Under Pressure. Hong Kong is in a Downtrend. Taiwan, South Korea, Australia and Thailand are in a Rally Attempt.
  • Indonesia has been the best performing APAC market year-to-date with an index gain of 11%, compared with 17% and 21% decline in S&P 500 and AAXJ index, respectively. Refer to stocks of interest list in page 9.
  • As a net exporter, Indonesia’s currency is one of the best performing currencies in the APAC region. Exports have accelerated since 2020, driven by strong crude oil and other commodity prices.
  • The Jakarta SE Composite index (0JAKCOMP) had a very high correlation with the price of crude oil between 1992 and 2008. This correlation has declined since 2008. However, the current correlation is at a decade high driven by a resurgence in oil prices recently. This year, financials have contributed more than energy stocks to index performance. Indonesian banks have historically benefited in a rising interest rate environment.
  • Highlighted Focus List Idea: Bank Central Asia (BCA.ID; BBCA IJ).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) broke below May lows of $65.40 and made a new 52-week low. We recommend a cautious approach to adding risk. If possible, raise cash and be more defensive in markets that are in a Downtrend. Refer to page 15 for a list of defensive ideas trading near pivot across APAC.
  • India is in a Confirmed Uptrend. Seven markets, including Japan and China, are in an Uptrend Under Pressure. Thailand is in a Rally Attempt. Hong Kong, Australia, South Korea and Taiwan are in a Downtrend.
  • We downgraded Hong Kong to a Downtrend from an Uptrend Under Pressure as the Hang Seng broke below May lows of 19,179. Key support remains between 18,200 and 18,400. Refer to pages 12 and 13 for a weekly and monthly annotated chart of the Hang Seng. Refer to page 14 for mini charts for technology stocks that have come under regulatory scrutiny.
  • Beware of Catching a Falling Knife: The historical annual trailing PE for the Hang Seng is 7.6x and is currently near 2018 lows. The forward PE for the Hang Seng is approaching six-year lows. It is possible the market could rebound as it did from 2018 lows. However, the current environment is unprecedented given geopolitical tensions, regulatory issues and macroeconomic issues.
  • Highlighted Focus List Idea: Gulf Energy Development (GULF.TH; GULF TB).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) is consolidating below its 50- and 100-DMA resistance. We recommend a cautious approach as volatility is picking up, accompanied by weak price action. Wait for indices to settle down and find support before reassessing risk.
  • Nine markets, including Japan, India, Taiwan and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong and China, are in an Uptrend Under Pressure. Thailand is in a Rally Attempt.
  • India, Japan, and Indonesia are leading based on 3-month price performance and have remained resilient despite volatility. On the flip side, Taiwan and South Korea are vulnerable markets testing key support levels.
  • The Energy, Utility and Basic Material sectors are outperforming over the last four to eight weeks. The Financial, Health Care and Technology sectors have underperformed during this period.
  • Only a few stocks held their gains constructively after rallying from lows amid an increase in volatility. Refer to page 12 for a list of stocks that have held gains after rallying from 52-week lows.
  • Highlighted Focus List Idea: Bank Central Asia (BCA.ID; BBCA:IJ).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) failed to hold above its 21- and 50-DMA support. We recommend a cautious approach while volatility persists. Wait for indices to settle down and find support before reassessing risk. Continue to focus on quality ideas with rising relative strength and good A/D Ratings.
  • Eight markets, including Japan, India, Taiwan and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong and China, are in an Uptrend Under Pressure. Two markets are in a Rally Attempt.
  • MSCI AC Asia Pacific ex Japan growth index has underperformed the value index over the last 52-weeks. The spread between the growth and value indices increased between December 2021 and March 2022. However, the spread has remained constant since then, with both indices declining. We believe the strength in growth stocks in other major markets is not reflected in the growth index in APAC due to high weighting for China and Hong Kong.
  • The average RS Rating of high PE stocks (PE>25) is currently higher than for low PE (PE<25) and high dividend yield (>3%) stocks. Until eight weeks ago, low PE and high dividend yield stocks were outperforming high PE stocks in terms of average RS Rating. There was significant outperformance in the Basic Material and Capital Equipment sectors. Refer to page 8 for stocks of interest with a PE Ratio above 25.
  • Highlighted Focus List Idea: Larsen & Toubro (LST.IN; LT IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) closed above its 50-DMA and is testing that level. Most markets are in a Confirmed Uptrend and continue to trend positively. We recommend a gradual and selective approach to allocating capital.
  • Nine markets, including Japan, India, China, Taiwan and South Korea, are in a Confirmed Uptrend. Two markets, including Hong Kong, are in an Uptrend Under Pressure. Two markets are in a Rally Attempt.
  • Among the major APAC indices, the Sensex and the Nikkei have outperformed this year, and their year-to-date performance has turned positive. Refer to page 7 for a year-to-date performance comparison of the major APAC markets.
  • The Sensex is approaching a 52-week high and we have seen breadth improve across sectors in India. The Utility, Financial and Basic Material sectors saw significant improvement over the last four weeks. Refer to page 8 for stocks of interest in India.
  • The Nikkei gained above its 200-DMA as the market adjusted for less aggressive expected rate hikes in the U.S. for the rest of the year. The Energy, Technology and Capital Equipment sectors outperformed over the last four weeks. Refer to pages 9 and 10 for stocks of interest in Japan.
  • Highlighted Focus List Idea: ICICI Bank (ICG.IN; ICICIBC IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) continues to trade in a tight range below its 50-DMA resistance. We recommend a gradual and selective approach to allocating capital.
  • Seven markets, including Japan, India and South Korea, are in a Confirmed Uptrend. Two markets, including Hong Kong, are in an Uptrend Under Pressure. Four markets are in a Rally Attempt, including China and Taiwan.
  • Hong Kong is in an Uptrend Under Pressure with 13 distribution days. The percentage of liquid stocks trading above their 200-DMA has declined to 22% from 30% eight weeks ago. Refer to page 7 for an annotated chart of the Hang Seng.
  • In Hong Kong, the Health Care and Transportation sectors had positive median gains over the last eight weeks, while all other sectors were negative. Underperformance of the Retail Internet, Internet Content, Banks and Real Estate Developers industry groups dragged the index down.
  • Hong Kong had 13 distribution days over the last 25 sessions, which is the highest for 25 years. We recommend investors maintain a cautious approach until distribution days decline. Five distribution days will expire in the next seven sessions.
  • Highlighted Focus List Idea: Hindustan Unilever (HDL.IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) continues to trade in a tight range below its 50-DMA resistance. Markets remain constructive as most are in a Confirmed Uptrend. We recommend a prudent and gradual approach to adding risk.
  • Seven markets, including Japan, India and South Korea, are in a Confirmed Uptrend. Two markets, including Hong Kong, are in an Uptrend Under Pressure. Three markets are in a Rally Attempt, including Taiwan. China is in a Downtrend.
  • Strength has broadened across APAC, with significant improvement in New Zealand, India and Japan. India is among the strongest APAC markets. We upgraded India to a Confirmed Uptrend from a Rally Attempt after the Sensex staged a day-30 follow-through day. In India, the Consumer Staple, Financial and Basic Material sectors saw the most improvement in terms of the percentage of stocks trading above their 200-DMA in the last four weeks.
  • Refer to pages 9 and 10 for a list of stocks with good technical characteristics from outperforming Industry Groups and themes.
  • Highlighted Focus List Idea: ABB India (AB.IN; ABB IN).

APAC Market Update

Posted on by Derek Higa

Key Points:

  • We upgraded India to a Confirmed Uptrend from a Rally Attempt after the Sensex staged a day-30 follow-through day. The index gained 1.9% on higher volume from the previous session and bounced off its 100-DMA support.
  • We advise investors to gradually increase risk and look for ideas with high relative strength and breaking out of sound bases after holding above logical levels of support. Refer to page 3 for a list of stocks trading near pivots and above their 50- and 200-DMA.
  • In terms of sectors, Capital Equipment and Financial are leading over the past four weeks, while Consumer Cyclical and Consumer Staple are leading over the past 8–13 weeks.
  • Actionable stocks among Focus List ideas include Bharat Electronics (BHE.IN; BHE IN), Hindustan Unilever (HDL.IN; HUVR IN), Indian Hotels (INH.IN; IH IN), and Page Industries (PI1.IN; PAG IN).
  • After today’s status change, seven markets, including India, Japan, and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong and China, are in an Uptrend Under Pressure and three markets are in a Rally Attempt.

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • The MSCI Asia ex. Japan index (AAXJ) pulled back after testing its declining 21-DMA resistance. We view markets as more constructive as they continue to hold above short-term support levels. However, we expect volatility to rise and markets to remain choppy in the near-term. We recommend a prudent and gradual approach to increasing risk.
  • Six markets, including Japan and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong and China, are in an Uptrend Under Pressure. Four markets are in a Rally Attempt, including India and Taiwan.
  • Growth stocks led the rally since the pandemic lows and this leadership continued until January. However, value stocks are leading since February. Refer to page 6 for a comparison chart of the MSCI Asia Value and Growth indices. India is leading in terms of both value and growth stocks compared with other major APAC markets.
  • Stocks from the Consumer Staple, Capital Equipment and Health Care sectors have shown improving momentum and relative outperformance. Refer to page 10 for mini charts of notable outperformers from these sectors.
  • Highlighted Focus List Idea: Hindustan Unilever (HDL.IN; HUVR IN).

APAC Weekly Summary

Posted on by Derek Higa

Key points from this week’s report:

Please refer to the attached PDF for the full report.

  • Six markets, including Japan and South Korea, are in a Confirmed Uptrend. Three markets, including Hong Kong and China, are in an Uptrend Under Pressure. Four markets are in a Rally Attempt, including India and Taiwan. Follow-through days in Japan and South Korea are encouraging. However, we expect markets to remain volatile before the FOMC decision next week, as well as the ongoing earnings season. We recommend gradually increasing risk and focusing on quality ideas with rising relative strength.
  • We upgraded Japan to a Confirmed Uptrend from a Rally Attempt, after the Nikkei 225 staged a day-21 follow-through day. Over the past four to eight weeks, the Health Care and Retail sectors have outperformed, while Energy and Basic Material have lagged.
  • The Sensex has outperformed other major APAC markets over the last 52-weeks, with ~4% gain during this period. The Indian Rupee has had better than average performance this year compared with peers. Outperformance of the Sensex, combined with the relative stability of the currency, makes the Indian market stand out compared with other APAC peers.
  • Outperformance of the Sensex can be attributed to India’s strong GDP growth estimates among major economies. There has also been a slowdown in institutional selling this month, after intense selling over the last nine months. The Capital Equipment, Consumer Staple and Consumer Cyclical sectors lead in India. Refer to page 12 for stocks of interest in India.
  • Highlighted Focus List Idea: Tube Investments (TF.IN; TF: IN).